PNB plans massive fundraising through risky AT-1 bonds, QIPs, among other options by year end

Punjab National Bank (PNB) is planning to raise Rs 11,500 crore capital through the infamous Additional Tier-1 (AT-1) bonds, tier II bonds, and qualified institutional placement before the end of this year. PNB’s Managing Director S S Mallikarajuna Rao said that the fundraising will shore-up the capital base to meet business plans of the public sector lender, news agency PTI reported. PNB is India’s second largest state-owned bank. Yesterday the bank announced a 22% jump in net profit to Rs 621 crore in the July-September quarters, against Rs 507 crore in the same period last year.

S S Mallikarjuna Rao added that PNB has already taken approval from the board for raising Rs 14,000 crore by way of Tier II, AT-1 bonds, and QIP. “Of this, Rs 4,000 crore is for Tier II. Against this, we have raised Rs 2,500 crore and remaining Rs 1,500 crore and additional Rs 3,000 crore from AT-1 bonds will be raised before November 30. With respect to QIP of Rs 7,000 crore, we are planning to go to the market in the second or third week of December,” he added.

PNB’s capital stood at Rs 1,882 crore at the end of last quarter while reserves and surplus were at Rs 85,074 crore. Gross non-performing assets stood at Rs 96,313 crore. Capital Adequacy Ratio (CAR) – Basel III was at 12.84%. According to the report, with this fund mobilisation, the CAR, would go up to 13.5-14%. Additional capital would also be raised by PNB by means of selling real estate assets worth Rs 500 crore. “With respect to unlocking value in subsidiaries, as on today we don’t have any plan. We will be looking at that proposal in future if anything is required. We are adequately capitalised,” he said.

Talking about recovery, Mallikarjuna Rao said that PNB is aiming about Rs 16,000 crore for this fiscal keeping in mind the pandemic. PNB, so far this year, has done cash recovery of Rs 3,200 crore and another Rs 5,000 crore would be made by the end of the fiscal year. PNB is also eyeing Rs 8,000 crore by means of resolutions at the National Company Law Tribunal.

PNB had excess liquidity of Rs 30,000-32,000 crore as deployment opportunity was muted during the first half due to lockdown, the bank’s MD said, adding, with festive season setting in there are opportunities in retail, MSME, road and corporate projects. Shares of PNB end flat with a negative bias on Tuesday at Rs 27.85 per share. Shares of the bank are down 57% year-to-date.